Texas Rangers, Abitibi, WaMu, Lehman: Bankruptcy
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The bankruptcy judge who presided over the reorganization of the Texas Rangers professional baseball club told one of the team’s eventual buyers during a conference in July 9 that he could no longer speak to the press as a lawyer, only as a businessman aiming to buy the franchise.
U.S. Bankruptcy Judge Michael Lynn also said he might call in the U.S. Attorney to conduct a criminal investigation if Major League Baseball were to discourage bidding at the auction held later.
The statements by Lynn were contained in the transcript of a July 9 conference held in the judge’s chambers. Lynn unsealed the transcript at the request of The New York Times.
The conference was held when the fate of the team and the identity of the eventual buyer were up in the air. Lynn warned sports lawyer Chuck Greenberg, who was in the buying group favored by Major League Baseball, that ethical rules governing lawyers prohibited him from criticizing the judge in a statement referring to himself as a lawyer. Lynn said Greenberg was at liberty to say anything he wished to the press so long as he made it clear he was speaking a businessman, not a lawyer.
Lynn said that “people who are trying their case in the media are trying to bully me. I do not like being bullied.”
In the conference, Lynn also referred to a prior hearing in which some lawyers were participating by telephone conference call. Thinking the call had been discontinued when the line was still open into the courtroom, a lawyer for Major League Baseball said, in substance, that the league would terminate the Rangers’ franchise if the disposition of the team weren’t to MLB’s liking. Lynn said that the statement was “very unprofessional.” If it were to occur again, Lynn said he would end the lawyer’s right to participate in the case and refer the matter to disciplinary authorities.
For a report on other aspects of events in the chambers conference, click here for Bloomberg coverage.
Soon after the auction, the Rangers emerged from reorganization in August with a confirmed Chapter 11 plan in which the club was bought by a group including Greenberg and team President Nolan Ryan.
The Rangers filed under Chapter 11 in May with a sale contract and a plan that claimed to be paying all creditors in full. Michael “Buzz” Rochelle, brother of Bloomberg reporter Bill Rochelle, is a lawyer for an agent for the lenders.
The case is In re Texas Rangers Baseball Partners, 10-43400, U.S. Bankruptcy Court, Northern District of Texas (Fort Worth).
Abitibi Reorganization Plan May Be Confirmed Today
The AbitibiBowater Inc. reorganization may be approved at a hearing today, given that the bankruptcy judge wrote a 28-page opinion yesterday explaining why he will confirm the Chapter 11 plan for the largest newsprint maker in North America.
U.S. Bankruptcy Judge Kevin J. Carey held six days of confirmation hearings beginning in September. Of the 30 objections, all but five were resolved. In yesterday’s opinion, Carey explained why none of the remaining objections has merit. Carey also took into consideration how the Canadian side of the reorganization was approved in September.
The companies’ assets and debt aren’t consolidated in the plan. Consequently, creditors of each of the more than 40 affiliated companies will have different recoveries.
Although secured claims will be paid in full, unsecured creditors of AbitibiBowater Inc. are expected to recover 0.8 percent on their $746 million in claims. The recovery by unsecured creditors of Abitibi subsidiaries will range from 100 percent for Augusta Woodlands LLC to nothing on the $649 million in claims against Abitibi-Consolidated Alabama Corp.
Among the larger Abitibi subsidiaries, the recovery ranges between 0.4 percent and 37.4 percent. The predicted recovery on $656 million in claims against Abitibi-Consolidated Corp. is 12 percent.
For subsidiaries of Bowater, some creditors will have no recovery. Among the Bowater subsidiaries with larger creditor bodies, the predicted recovery ranges between 0.9 percent and 36.5 percent. Creditors with claims of $2.75 billion against Bowater Inc. are expected to take home 48.4 percent, the revised disclosure statement says.
The company was formed in October 2007 by a merger between Montreal-based Abitibi-Consolidated Inc. and Greenville, South Carolina-based Bowater Inc. Abitibi is a producer of newsprint, uncoated mechanical paper and lumber. Bowater also makes newsprint along with papers, bleached kraft pulp and lumber.
The Montreal-based company began reorganizing with 24 pulp and paper mills plus 30 wood-product plants. Revenue in 2008 was $6.8 billion. In Chapter 11 petitions filed in April 2009, the combined AbitibiBowater companies listed assets of $9.9 billion and debt totaling $8.8 billion as of September 2008.
The case is AbitibiBowater Inc., 09-11296, U.S. Bankruptcy Court, District of Delaware (Wilmington).
WaMu Noteholders Lodge Contingent Objection to Plan
Washington Mutual Inc. senior noteholders filed what they called a “limited objection” to the reorganization plan that comes up for approval at a confirmation hearing on Dec. 1 through Dec. 3.
The noteholders admit their objection will be moot if, as they hope, the plan ends up paying them in full, with interest. Their objection relates to what they described as the “debtor’s flawed waterfall distribution scheme.”
Specifically, the senior noteholders don’t believe the WaMu plan properly invokes subordination provisions where their group should be paid in full before there are distributions on subordinated notes and the so-called PIERS securities. In distinction to how the plan is written, the senior noteholders argue they are entitled to full payment of all post-petition interest before subordinated creditors receive anything.
The examiner for WaMu concluded in his Nov. 1 report that the plan and its proposed settlement with the Federal Deposit Insurance Corp. and JPMorgan Chase & Co. “reasonably resolves contentious issues.”
WaMu’s revised plan will distribute over $7 billion to creditors. To read about the settlement before it was modified, click here for the May 24 Bloomberg bankruptcy report. For a summary of changes WaMu made to its plan in October, click here for the Oct. 7 Bloomberg bankruptcy report. Click here to read the May 18 Bloomberg bankruptcy report for a summary of WaMu’s plan.
The WaMu holding company filed under Chapter 11 in September 2008, one day after the bank subsidiary was taken over. The bank, which had been the sixth-largest depository and credit-card issuer in the U.S., was the largest bank failure in the country’s history. The holding company filed formal lists of assets and debt showing property with a total value of $4.49 billion against liabilities of $7.83 billion.
The holding company Chapter 11 case is In re Washington Mutual Inc., 08-12229, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Last Papers Filed in Marathon Lehman-Barclays Lawsuit
Lehman Brothers Holdings Inc. and Barclays Plc filed their last papers yesterday, bringing a close to the trial that began in April where Lehman contends the bank took $11 billion more than it was entitled to receive when it purchased the brokerage business a week after the Chapter 11 filing in September, 2008.
Closing arguments were held in October. Both sides filed post-trial briefs yesterday. The papers weren’t brief. Lehman’s brief was 413 pages, not including exhibits. Barclays weighed in at 614 pages.
Lawyers in the case said there could be a decision from the bankruptcy judge in January or February. For Bloomberg coverage, click here and here.
Lehman paid $42.1 million for professional fees in October, bringing the total to $1.1 billion since the Chapter 11 filing in September 2008. For Bloomberg coverage, click here.
The Lehman holding company and its non-brokerage subsidiaries filed a revised Chapter 11 plan and disclosure statement in April. For details, click here and here for the April 15 and 16 Bloomberg bankruptcy reports. Lehman said it intends to amend the plan and have it approved in a confirmation order by March.
The Lehman holding company filed under Chapter 11 in New York on Sept. 15, 2008, and sold office buildings and the North American investment banking business to London-based Barclays Plc one week later. The Lehman brokerage operations went into liquidation on Sept. 19, 2008, in the same court. The brokerage is in the control of a trustee appointed under the Securities Investor Protection Act.
The Lehman holding company Chapter 11 case is In re Lehman Brothers Holdings Inc., 08-13555, while the liquidation proceeding under the Securities Investor Protection Act for the brokerage operation is Securities Investors Protection Corp. v. Lehman Brothers Inc., 08-01420, both in U.S. Bankruptcy Court, Southern District of New York (Manhattan).
Old GM Disclosure Still Not Ready for Distribution
Although the bankruptcy judge tentatively approved the disclosure statement in October, old General Motors Corp. hasn’t come to terms on some details about the trusts to be created under the plan and other issues.
If there isn’t agreement, there could be a hearing in January to resolve the disputes. For Bloomberg coverage of yesterday’s hearing, click here.
Old GM filed a liquidating Chapter 11 plan in August. A trust for unsecured creditors will distribute the stock and warrants issued by new GM as consideration for the sale of the assets. New GM is formally named General Motors Co. For details on the plan, click here for the Sept. 1 Bloomberg bankruptcy report.
Old GM began the largest manufacturing reorganization in history by filing under Chapter 11 on June 1, 2009. The sale was completed on July 10, 2009. GM listed assets of $82.3 billion against debt totaling $172.8 billion.
The case is In re Motors Liquidation Co., 09-50026, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
Bankrupt Jewelery Esmerian Charged with Bank Fraud
Ralph Esmerian, former owner of liquidated antique jewelry retailer Fred Leighton LLC, was arrested yesterday by federal officials and charged with bank fraud and wire fraud, among other crimes. According to the indictment, he pledged the same collateral several times. An assistant U.S. attorney said other collateral “simply disappeared.” To read Bloomberg coverage, click here.
Merrill Lynch Mortgage Capital Inc., a victim of the alleged crime, touched off the Fred Leighton Chapter 11 in April 2008 by filing suit in state court to hold a foreclosure auction. Ultimately, Fred Leighton was liquidated under a Chapter 11 plan proposed by Merrill. The Leighton plan was confirmed in November 2009.
Esmerian and the company that bears his name, R. Esmerian Inc., were the targets of involuntary Chapter 7 petitions in May. Esmerian put himself and the company into Chapter 11 in June.
The bankruptcy cases are In re Fred Leighton Holdings Inc., 08-11363, In re R. Esmerian Inc. and In re Ralph Esmerian, 10-12719 and 10-12721, all in U.S. Bankruptcy Court, Southern District of New York (Manhattan).
Tamarack Has $40 Million Offer; Homeowners to Operate Resort
Tamarack Resort LLC received an offer from a company called Green Valley Holdings LLC to purchase the golf and ski resort in Valley County, Idaho, for $40 million. For Bloomberg coverage, click here.
After the bankruptcy judge refused to approve $2 million in secured financing, the secured lender Credit Suisse AG, Cayman Islands Branch, filed a motion to dismiss the Chapter 11 reorganization or convert to a liquidation in Chapter 7. A hearing is scheduled for Dec. 6 and 7.
Although Tamarack isn’t operating, there is agreement for the homeowners’ association to lease the ski resort for the coming winter season. The land is leased from the State of Idaho.
The association will pay the state $80,000 to extend the time for assuming the lease until June 2011. Credit Suisse has paid the state almost $300,000 in rent that was due in January. Credit Suisse will pay the state another $125,000 for 2011.
The Tamarack case began with an involuntary petition in Chapter 7 which the company opposed. The company lost, was put into a Chapter 7 liquidation, and later converted the case to Chapter 11 even though a Chapter 7 trustee had been named in March.
The project’s 27.5 percent owner, VPG Investments Inc., filed for Chapter 11 reorganization in 2008. The petition was dismissed in Oct. 2008. VPG was controlled by Mexican businessman Alfredo Miguel Afif.
The new case is In re Tamarack Resort LLC, 09-03911, U.S. Bankruptcy Court, District of Idaho (Boise). The previous case was In re VPG Investments Inc., 08-00253, U.S. Bankruptcy Court, District of Idaho (Boise).
GECC Asks Permission to File Plan for Black Crow
General Electric Capital Corp., the secured lender, reacted to the reorganization plan proposed by Black Crow Media Group LLC by filing a motion asking the bankruptcy judge in Jacksonville, Florida, to terminate the exclusive right of the closely held owner of 22 radio stations to file a plan.
GECC, owed $38.9 million at the outset of the reorganization in January, contends that the Black Crow plan can’t be confirmed because it violates numerous provisions in bankruptcy law.
If GECC wins, it won’t happen this month. The bankruptcy judge scheduled a preliminary hearing on Dec. 29.
Black Crow filed a plan on Nov. 8, just as the exclusive right to propose a reorganization was expiring. By filing the plan, GECC is precluded from filing a plan of its own until Jan. 11 when Black Crow’s exclusive right to solicit acceptances runs out.
The plan would give GECC $13 million cash. As an alternative, GECC could elect to take a 10-year note for about $15.6 million, representing Black Crow’s estimate of the value of the collateral. For details on how the Black Crow plan treats Stamford, Connecticut-based GECC, click here for the Nov. 10 Bloomberg bankruptcy report.
The plan would pay unsecured creditors in full over five years. Unsecured claims are less than $700,000, according to the disclosure statement explaining the plan.
Black Crow filed for Chapter 11 protection in January, two days before a hearing in U.S. district court where GECC was seeking appointment of a receiver following default on term loans and a revolving credit.
Black Crow’s stations are in five markets in Florida, Alabama, Georgia and Tennessee. In addition to the GECC debt, Black Crow said at the outset that there was another $6 million owing to unsecured creditors. Daytona Beach, Florida-based Black Crow had $12.9 million of revenue in 2009, a 23 percent decline from 2008.
The case is In re Black Crow Media Group LLC, 10-00172, U.S. Bankruptcy Court, Middle District of Florida (Jacksonville).
MIG Confirms Full-Payment Plan after Settlement
MIG Inc., the indirect owner of 47 percent of the leading telecommunications provider in the Republic of Georgia, confirmed a Chapter 11 plan on Nov. 19 resulting from a settlement with the creditors’ committee. The plan stemming from the compromise improved treatment for preferred shareholders. Unsecured creditors are to be paid in full.
The settlement came about when MIG was facing motions by the committee to end the company’s exclusive right to propose a reorganization, appoint a Chapter 11 trustee, or dismiss the case.
The Chapter 11 filing was the company’s reaction to a $188 million judgment from the Delaware Chancery Court in an appraisal action in favor of the preferred shareholders following MIG’s acquisition in 2007. The Chancery Court judgment was upheld on appeal by the Delaware Supreme Court in November 2009.
Under the confirmed plan, preferred shareholders are receiving new secured notes bearing interest that begins at 15.5 percent and rises to 20 percent. Originally, the plan called for 10 percent interest.
The new notes are secured by all the assets and the stock of reorganized MIG. The loan documents call for excess cash to be paid against the notes and require a portion of proceeds from a public offering to be used in payment of the notes.
MIG said all along that the company is worth enough to pay all creditors in full.
Charlotte, North Carolina-based MIG admitted that bankruptcy was the only alternative because the company lacked liquidity to pay the judgment in full immediately. MIG’s petition said assets and debt both exceeded $100 million.
The case is In re MIG Inc., 09-12118, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Point Blank Board Observer Reports to Committees
Point Blank Solutions Inc., a manufacturer of soft body armor for the military and law enforcement, was authorized by the bankruptcy judge last week to name Eric J. Rosenbloom to be an observer of the board of directors.
The special position on the board was cobbled together as a compromise resulting from a motion by the creditors’ committee seeking the appointment of a Chapter 11 trustee. Rosenbloom was general counsel for Hilco/Great American Group. He will report to the official committees representing stockholders and unsecured creditors.
The former chief executive and chief operating officer of Point Blank were convicted in September of orchestrating a $185 million fraud.
Point Blank has a plant and head office in Pompano Beach, Florida, and a second plant in Jacksboro, Tennessee. Revenue in 2009 exceeded $153 million.
The Chapter 11 petition in April listed assets of $64 million against debt totaling $68.5 million. Debt included a $10.5 million secured loan paid off by financing for the Chapter 11 case. Point Blank said it also owes $28.2 million to trade suppliers.
The case is In re Point Blank Solutions Inc., 10-11255, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Taylor Bean Seeks More Inclusivity ‘Just in Case’
In case Taylor Bean & Whitaker Mortgage Corp. doesn’t succeed in winning approval of the Chapter 11 plan at the currently scheduled confirmation hearing on Jan. 19, the company filed a motion last week asking the bankruptcy judge to extend the exclusive right to propose a plan until April 23.
A hearing on the exclusivity motion will be held at the Jan. 19 confirmation hearing.
Taylor Beam was once the largest independent mortgage originator in the U.S. For details on the plan, supported by the official creditors’ committee, click here for the Nov. 12 Bloomberg bankruptcy report.
Taylor Bean filed under Chapter 11 in August 2009, three weeks after federal investigators searched the offices of the Ocala, Florida-based company. The day following the search, the Federal Housing Administration, Ginnie Mae and Freddie Mac prohibited the company from issuing new mortgages and terminated servicing rights.
Taylor Bean managed an $80 billion mortgage servicing portfolio. The petition said assets and debt both exceed $1 billion.
The case is Taylor Bean & Whitaker Mortgage Corp., 09-07047, U.S. Bankruptcy Court, Middle District of Florida (Jacksonville).
Former Bulk Carrier Transfield Files Chapter 15 in NYC
Transfield ER Cape Ltd., which at one time operated 200 bulk cargo ships under charter agreements, filed for Chapter 15 protection in New York yesterday.
The company was ordered to be would up on Sept. 30 in the High Court of Justice of the British Virgin Islands. Joint liquidators were appointed. The liquidation in the Virgin Islands was recognized in the U.K. as a so-called foreign main proceeding on Nov. 1.
The liquidators are requesting a similar designation in the U.S. so five pending lawsuits will be halted. If the U.S. bankruptcy judge determines that the proceedings in the islands are entitled to take the lead, all creditor actions in the U.S. will be permanently halted.
At one time, the company’s balance sheet had assets of $273 million and liabilities of $432 million, the liquidators said in a court filing.
The case is In re Transfield ER Cape Ltd., 10-16270, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
Chapter 11 Veteran AMF Bowling Downgraded to Caa1
AMF Bowling Worldwide Inc., whose 307 locations make it the world’s largest bowling alley operator, has “significant medium-term debt maturities” that are a concern for Moody’s Investors Service. As a result, Moody’s lowered the corporate grade by one notch yesterday to Caa1.
Moody’s pointed to the $40 million revolving credit that matures in June 2012.
The revolving credit and the $227 million first-lien term loan were also downgraded one level.
Their new ratings are B2. The $80 million second-lien term loan remained at Caa2.
Richmond, Virginia-based AMF filed for reorganization in July 2001 and emerged with a confirmed Chapter 11 plan in February 2002 by giving unsecured creditors 7.5 percent of the new stock.
The bank lenders, which were owed $625 million, received a combination of cash, 92.5 percent of the stock, and $150 million in new debt. At the time, AMF had over 500 bowling centers.
AMF was acquired in March 2004 by Code Hennessy & Simmons LLC.
Physical Possession Required to Sue on Mortgage Note
Chief U.S. Bankruptcy Judge Judith Wizmur in Camden, New Jersey, wrote an opinion last week telling Countrywide Home Loans Inc. that procedures it employs for handling mortgage notes are defective and preclude the current owners of the notes from collecting on the debts.
The case involved a bankrupt who started a lawsuit in bankruptcy court to knock out a lender’s claim based on two mortgage notes. The bankrupt won, because Wizmur held that the current owner of the mortgages never had physical possession of the mortgage note. Without possession of the note, neither the current owner of the mortgage nor the servicer could enforce the note by filing a proof of claim.
Wizmur’s opinion said it was Countrywide’s practice to retain possession of notes on mortgages it originated. Even when the mortgages were sold into securitizations, Countrywide retained possession of the notes, presumably because Countrywide was retaining servicing rights.
Wizmur analyzed New Jersey law and said that anyone who attempts to enforce a mortgage note must have possession of the note. Demonstrating possession of the note is protection for the homeowner who can avoid having to pay twice by demanding to see the note in possession of whomever is demanding payment.
The opinion doesn’t void the underlying debt nor undercut the validity of the mortgage. In the bankruptcy case, the owner of the note was precluded for proving the amount of the debt and was forced by Wizmur’s opinion to accept the amount of the debt as listed by the bankrupt.
The opinion also apparently means that Countrywide needs to deliver mortgage notes to purchasers of the mortgages, along with an assignment transferring the notes to the securitization trusts. The assignments must be permanently attached to the mortgage notes.
Countrywide may have retained possession of the notes because it retained servicing rights. As servicer, Countrywide may have assumed it would be recognized as an agent for the owners of the notes. Wizmur disagreed. She said New Jersey law requires delivery of the note to the new owner. Delivery to the agent isn’t sufficient.
The result could be different in other states.
The case is Kemp v. Countrywide Home Loans Inc. (In re Kemp), 08-2448, U.S. Bankruptcy Court, District of New Jersey (Camden).
To contact the editor responsible for this story: David E. Rovella at email@example.com.
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